In Campbell vs. PricewaterhouseCoopers LLP, Case No. 09–16370 (June 15, 2011), the Ninth Circuit interpreted California law affecting whether unlicensed employees could be exempt (meaning salaried). The Ninth Circuit overturned a District Court ruling that held that unlicensed workers must be paid as an hourly worker under California law.
The opinion has importance to a wide range of companies, including practically every law firm, medical practice, university, school, accounting firm, engineering firm, and consulting firm. The Ninth Circuit recognized the potential wide impact of the District Court’s ruling that was being overturned, as follows:
In addition to undercutting the professional exemption’s unambiguous text and structure, the district court’s reasoning for categorically excluding accountants from subsection (b) would create highly problematic precedent. Were we to adopt the district court’s analysis, unlicensed California employees in all eight of subsection (a)’s enumerated professions—including doctors, engineers, and lawyers—would have a compelling argument for mandatory overtime pay. This cannot be the law. …
The district court suggested its application of these two statutory canons extended only to the accounting profession. We see no reason why this holding would be so confined. Courts may apply statutory canons only when a statute’s text is ambiguous. We have already held the professional exemption’s text is not ambiguous, but even if we momentarily assume to the contrary, any textual ambiguity would necessarily affect all eight enumerated professions in subsection (a), not just accounting. This is because the exemption’s text and structure do nothing to distinguish accounting from the seven other enumerated professions.
Indeed, the district court did not find any accounting-specific ambiguity on the face of the exemption. Rather, the district court believed the exemption was structurally ambiguous as to the relationship between subsections (a) and (b)—an ambiguity that would necessarily affect all eight enumerated professions. [Citations omitted]
The professional exemption is as follows:
(3) Professional Exemption [:] A person employed in a professional capacity means any employee who meets all of the following requirements:
(a) Who is licensed or certified by the State of California and is primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting; or
(b) Who is primarily engaged in an occupation commonly recognized as a learned or artistic profession.
The Ninth Circuit concluded that the plain reading of the statute allowed subsection (a) to be entirely independent from section (b). Consequently, the District Court could not determine that a whole class of employees was hourly workers because they did not qualify under the professional exemption without first analyzing whether such employees might be considered exempt because their occupation was a commonly recognized as a learned profession. This inquiry requires an examination whether the specific duties being performed are predominately intellectual and varied in character.
Although it was not required to do so in order to reverse the District Court’s ruling, the Ninth Circuit nevertheless also analyzed the Administrative exemption. To exempt an employee under the administrative exemption, an employer must establish five elements:
1. The employee performs work “directly related to management policies or general business operations” of either the employer or the employer’s clients;
2. The employee “customarily and regularly exercises discretion and independent judgment”;
3. The employee works “under only general supervision” while either: (1) performing work along specialized or technical lines requiring special training, experience, or knowledge, or (2) executing special assignments and tasks;
4. The employee is “primarily engaged” in exempt work meeting the above requirements; and
5. The employee meets a minimum salary requirement.
The Ninth Circuit indicated that this exemption also was highly individualized and highly fact specific. Consequently, a blanket interpretation that entire groups of employees were not spending more than 50% of their time on tasks pertaining to the Administrative exemption was not correct as a matter of law.
The Ninth Circuit’s opinion is entirely correct. For example, our firm employs highly credential economists, appraisers, financial analysts, and other consultants who clearly perform highly complex and non-repetitive work and who work under only general supervision. However, the state of California does not require or even offer a license to perform this work. No one would reasonably doubt that these employees can be paid on a salaried basis, yet the lower Court’s ruling could easily be interpreted to indicate that these people must be hourly workers. Thousands of other California employers would face difficult changes to their operations if the District Court’s ruling were to stand.